"pet-quality" is not a "bad" thing whatsoever. All it means is that the dog is not able to compete in the show-ring or in the case of a German ShepHERD is not able to compete in Schutzhund.
I used to train ShepHERDS (sorry the many wrong spellings of shepherds just get to me, lol) for Schutzhund and have also seen and trained many show quality ones. (german lines, NOT american lines)
Yours is a nice looking pup, but not show-quality, he is of working lines. The ears do look odd, but like you said, he's teething and they flopped back, although I have never seen them flop back in this fashion, usually they flop either side-ways or to the front, and usually its not both ears flopping the exact same way.
If you ever consider taping them, you should do it now, as he is almost to old for it. They might just come up on their own, but since both ears are flopping the exact same way, they might just be weak.
He is a very cute pup, and you should be proud of him. Again, there is nothing wrong with "pet-quality", they can make the best "pets".
A well bred and trained German Shepherd is a joy to own.
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reps-r-us